New York's Cooperative and Condominium Community

Habitat Magazine June 2020 free digital issue

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CO-OP/CONDO BUYERS

WHAT CO-OP/CONDO BUYERS NEED TO KNOW

Is It a “Sin” to Tax the Rich?

New York State

Pied-a-terre Tax

"It's a sin tax," says William Zeckendorf, developer of the luxury condominium at 15 Central Park West (image via Google Maps).

Nov. 6, 2019

Days after Democratic presidential hopeful Elizabeth Warren proposed taxing the rich to pay for Medicare-for-all and other social programs, New York state lawmakers are reviving efforts to tax rich people who buy second homes for $5 million or more, Bloomberg reports.

The so-called pied-a-terre tax, left for dead earlier this year, is back on the table. And – surprise, surprise – New York City real estate interests are not happy, and they’re gearing up for a fight. 

But it makes sense for people who can afford the most expensive apartments to help foot the tab for public-spending needs, says state Senator Brad Hoylman, a Manhattan Democrat who has been trying to pass a pied-a-terre tax since the heady condo boom days of 2014, when high-end buyers from other countries thought nothing of sheltering their millions in the safe harbor of Manhattan apartments. 

“They use our system of laws to protect their international investment in real estate, and I think there should be a premium on that,” says Hoylman, who hasn’t yet released a revised version of the bill. “This is a way to capture that purchasing power and use it for some common good.” 

The state Legislature killed Hoylman’s proposal for a recurring tax last March, opting instead to increase the one-time “mansion tax” to as much as 3.9 percent on purchases of $2 million or more, impose a separate transfer tax of 0.65 percent on $3 million-plus deals, and remove the privacy shield of shell companies cherished by many rich buyers. Those new taxes are expected to generate $365 million annually to improve the city’s public transit and other citywide needs. 

“It’s a sin tax,” counters William Zeckendorf, developer of some of the city’s priciest condo buildings, including 520 Park Avenue and 15 Central Park West. “It’s a tax meant to discourage economic behavior. And does the city really want to discourage pied-a-terre owners from coming to New York?”

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